FURTHER policy easing will only yield limited gains unless the government implements structural reforms to support economic growth, a former Bangko Sentral ng Pilipinas (BSP) official said.
The Bangko Sentral ng Pilipinas’ (BSP) latest rate cut — another 25 basis points that took the benchmark rate to 4.25 percent — was prompted by slowing economic growth and inflation having stayed within target.
GlobalSource Partners economist and former BSP deputy governor Diwa Guinigundo, however, said the decision “also highlights the inherent limits and responsibilities embedded in inflation targeting.”
Cumulative rate cuts have yet to lead to a decisive change in economic momentum, he noted, with consumption still soft, business sentiment weak and investment activity markedly uneven.
Banks, instead of being accommodative like the central bank, have also tightened credit standards — said to be a sign of increased risk aversion and financial caution that has dampened loan growth and dulled the effectiveness of lower policy rates.
“This dynamic underscores a central reality — monetary policy cannot compel risk-taking or override structural constraints,” Guinigundo said, noting that interest rate adjustments by themselves were not enough to address issues such as logistics inefficiencies, regulatory uncertainty and external vulnerabilities.
BSP Governor Eli Remolona Jr. has admitted to this, “literally challenging the fiscal and other executive agencies of government to do heavier lifting in economic revival,” Guinigundo continued.
He said that a pause “could have been more circumspect,” noting that adjusted inflation forecasts were not disclosed after the last policy meeting.
“The recent rate cut therefore reflects both accommodation and caution, a wake-up call to Malacañang and Congress,” Guinigundo said.
“It signals support for the economy, while recognizing diminishing returns from further easing in the absence of complementary reforms,” he added.
“Ultimately, sustainable growth will depend not only on calibrated monetary action but also on structural improvements, fiscal coordination, and renewed confidence in the broader economic environment.”
